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Better World Books Mishawaka, IN 20-Year Absolute NNN Lease South Bend – Mishawaka MSA Confidential Offering Memorandum
Table of Contents
Executive Summary & Lease
I. 3
Abstract
II. Aerial Maps 7
III. Market Overview 12
IV. Industry & Tenant Overviews 14
V. Additional Property Photography 20
VI. JLL Contacts 24
Executive Summary & Lease Abstract
Executive Summary
The Offering
Jones Lang LaSalle (“JLL”) is pleased to offer for sale the fee simple interest in a single tenant, industrial/office building (the “Property” or “Asset”) leased to Qumpus, Inc. d.b.a.
Better World Books (the “Company” or “Tenant”), located in Mishawaka, IN. Situated amidst a dense industrial corridor, the Property is positioned as a highly desirable
investment opportunity with an absolute NNN lease structure, strong real estate attributes, committed tenancy, low rent and contractual rent growth. The Property’s location is
further supported by proximity to several interstates, rail lines, the University of Notre Dame, South Bend International Airport, and an affluent immediate demographic profile
($80,000 average household income within 1-mile radius).This Offering represents the opportunity to purchase an industry-leading, international Tenant with significant intrinsic
real estate value and desirable long-term lease economics.
Exceptional In-Place Industrial Lease Economics
The Property is operating under a long-term lease with 20 years of remaining contractual term, annual rent
escalations of 2.0 percent, and below market rents. Additionally, the lease features two, ten-year renewal
options possessing 1.5 percent annual escalations. The Asset’s lease conditions offer investors a highly
passive, long-term investment with zero landlord responsibilities. While the Asset is an absolute NNN
investment, the lease also allows ownership to collect a supplemental management fee of up to 3.0 percent
of the current year’s rent, providing an additional value add.
‘Mission Critical’ Investment Opportunity
The Offering presents the rare opportunity to acquire a headquartered Asset for an industry-leading Tenant.
A new investor will have the opportunity to enjoy long term rental revenue supported by the Property’s
premier industrial location, which is adjacent to an AM General military assembly plant (2,400 employees),
along with ongoing nearby commercial development and close proximity to downtown South Bend.
Premier Industrial Marketplace
South Bend’s total industrial market experienced over 450,000 square feet of space under construction and
delivered in 1Q2017, continuing to be supported by low vacancy rates and positive net absorption figures.
This scale of revitalization is healthily supported by a vacancy rate of 4.1 percent across the South Bend –
Mishawaka MSA’s total industrial market, with multiple submarkets touting vacancy rates less than 2
percent. The Asset features rent roughly 45 percent below market average, providing future ownership
significant rental increase opportunity.
Highly Accessible Industrial Location
The South Bend Airport is positioned 10 miles west of the Asset, providing significant freight and transport
accessibility for the South Bend – Mishawaka MSA’s industrial marketplace. Roadways such as Interstates
90 and 20 and Indiana State Routes 23, 331 and 933 provide substantial ground transport optionality for
industrial operations. Further, Amtrak lines are also located throughout Mishawaka, including one line in
immediate proximity to the Asset.
Proprietary and confidential
4
Executive Summary
Property Overview
55740 Currant Road
Address
Active Submarket Development Mishawaka, IN 46546
Price / PSF $8,208,235 / $28
In October 2016, Indianapolis-based developer Flaherty & Collins received regional Cap Rate 8.00%
approval for a 400,000 square foot mixed-use development named The Mill at Ironworks NOI / PSF* $656,659 / $2.26
Plaza, positioned four miles west of the Asset. Located in the heart of Mishawaka’s
downtown, the $41 million project will include 223 luxury apartments and over 16,000 Lease Type Absolute NNN
square feet of retail and restaurant space. The Mill at Ironworks Plaza sets a tone for Landlord Responsibilities None
downtown Mishawaka, creating density, serving both as an amenity and as a centrally- Up to 3.0% of ‘Basic
located space for residents and visitors to live, shop, work and play in one of north Rent’ annually ($19,700
central Indiana’s urban cores. Additionally, The former Studebaker auto-manufacturing Management Fee (Additional Rent)**
in first year) - See
plant has recently undergone a redevelopment into a semiconductor research corporation Lease Abstract
national research center. Known as Ignition Park, the area tech hub will drive population
Property Type Warehouse / Office
growth and increase economic activity in the area.
Building Size (SF) 289,527
Tenant Outperforming Industry
Site Size (Acres) 21.31
2016 net sales year over year for Better World Books experienced a 2.3 percent increase, Year Built / Renovated 1970 / 1998
outpacing the industry average by 5.1 percent. Industry-wide reporting indicates a 2.8 Ownership Interest Fee Simple
percent loss in net sales year over year for 2016. The Company also touts a ratio of cash Parking 150 Spaces +/-
after operations of 5.2 percent (percentage of sales) as of June 2015, beating the industry
average of 2.7 percent (nearly 2x). Building Height 28’
Stories 1
Docks / Drive-ins None / 10
Construction Metal
Power 400a / 480v 3p
Remaining Lease Term*** 20.0 years
Lease Expiration 5/31/2037
Annual rent escalations
Rental Escalations
of 2.0% per year
2 x 10-year options at
Renewal Options
fair market value
Annual rent escalations
Renewal Escalations
of 1.5% per year
*Annual rent PSF based on building’s square footage
** Built into current NOI figure
***As of 8/1/2017
Proprietary and confidential
5
Lease Abstract
Lessee QUMPUS, INC. d.b.a. Better World Books
Lessor 55740 CURRANT ROAD LLC.
Date of Lease Execution May 3, 2017
Location 55740 Currant Road, Mishawaka, IN 46545
State County St. Joseph
Building Space 289,527 SF
Primary Lease Term 20 Years
Lease Type Absolute NNN
Options to Renew Lease 2 x 10-Years
Terms of Lease Renewal 1.50% annual increases over rent due for the immediately preceding Lease Year
Fixed Rent Terms Base Rent of $636,959.00 ($53,080 monthly)
2% annual increases over rent due for the immediately preceding Lease Year
Security Deposit in-place equal to one month's rent
Additional Rent Impositions (water & sewer charges, and governmental levies), Landlord's Insurance Costs, and Landlord's Management Fee
The Project (Definition) Collectively refers to the building, the land and the driveways, parking facilities, and similar improvemetns and easements associated with the foregoing or the operations thereof
Basic Rent (Definition) Annual rent value of present-time year
Landlord's Management Fee Tenant shall pay to Landlord any reasonable amounts incurred by Landlord in its ownership, operation, or management of the Project. Any Landlord's Management Fee cannot exceed 3% of the Basic
Rent, and the Tenant shall not be billed more than quarter-annually
Construction Management Fee If Landlord elects, in its sole discretion, to supervise any constructions or improvements, Teant shall pay to Landlord a construction management fee equal to 5% of the cost of such work
Use of Premises Warehousing, distribution, and general office use at time of lease, in compliance with Section 9 of Lease. Notwithstanding any language herein to the contrary, the Permitted Use as defined here may be
altered with prior Landlord approval, and such approval by the Landlord shall not be unreasonably withheld
Lesse's Insurance Obligations Tenant must hold and maintain the following insurance policies: 1) Commercial General Liability Insurance in amounts of $1M per occurrence in primary coverage, with an additional $3M in umbrella
coverage. 2) cause of loss-special risk form insurance. 3) contractual liability insurance. 4) worker's compensation insurance. Tenant's insurance shall also be primary and non-contirbutory when any
policy Landlord provides similar or duplicate coverage
Lessor's Insurance Obligations Property insurance for the building's replacement value
Utilities & Waste Disposal Services Lessee Responsibility
Project Taxes Lessee Responsibility
Project Repairs Lessee Responsibility
Lessor's Maintenance Requirement None
Building Operations To make inspections, repair, alterations, additions, changes, or improvements, Landlord must provide notice of ten (10) calendar days to Tenant
Additional Access by Lessor Landlord may provide reasonable prior notice (including verbal) to Tenant for entry if pertaining to security measures and/or prospective lenders and purchasers. Landlord can only show Premises to
prospective tenants within final six (6) months of the Term and with reasonable prior notice (including verbal)
Holding Over If Tenant fails to vacate the Premises at the end of the Term, Tenant shall pay in addition to present rental rate, Basic Rent equal to 150% of the Rent payable during the last month of the Term and
Tenant shall otherwise continue to be subject of all of Tenant's obligation under the Lease
Surrender of Premises No act by Landlord shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Landlord
Termination of Lease Tenant shall pay to Landlord the sum of (a) all Rent accrued hereunder through the date of termination, (b) all amounts due under Section 19.1, and (c) an amount equal to (but in no event less than zero)
of (1) the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value at a per annum rate equal to the "Prime Rate" as published on the date this
Lease is terminated by The Wall Street Journal in its listing of 'Money Rates' minus one percent, minus (2) the then present fair rental value of the Premises for such period, similarly discounted
Events of Default Includes: Payment Default, Abandonment, Estoppel/Subordination/Financial Reports, Insurance, Mechanic's Liens, Other Default, Insolvency
Landlord's Fees Whenever Tenant requests Landlord to take any action not required of Landlord hereunder or give any consent required or permitted under this Lease, Tenant will reimburse Landlord for Landlord's
reasonable, out-of-pocket costs payable to third parties and incurred by Landlord
Financial Reporting Provision Within 15 days after Landlord's request, Tenant will furnish Tenant's most recent audited financial statements (including any notes to them), to Landlord, or, if no such auditied statements have been
prepared, such other financial statements (and notes to them) as may have been prepared by an independent CPA or, failing those, Tenant's internally prepared financial statements
Waiver of Jury Trial Tenant, its respective successors, and Landlord knowingly waive any right to trial by jury in any litigation or to have a jury participate in resolving any dispute arising out of or with respect to this Lease
or any other instrument
Proprietary and confidential
6
Aerial Maps
Aerial & Site Map Overlay
Proprietary and confidential
8
Local Aerial Map
The South Bend Airport is positioned 10 miles west of the Asset, providing significant freight and transport accessibility for the South Bend – Mishawaka
MSA’s industrial marketplace. Roadways such as Interstates 90 and 20 and Indiana State Routes 23, 331 and 933 provide substantial ground transport
optionality for industrial operations. Further, Amtrak lines are also located throughout Mishawaka, including one line in immediate proximity to the Asset.
Proprietary and confidential
9
Immediate Aerial Map
Densely Populated Industrial Corridor
Adjacent to the Asset, AM General employs over 2,400 individuals in its Mishawaka & nearby South Bend facilities. AM General designs, engineers,
manufactures, supplies and supports specialized vehicles for military and commercial customers worldwide. AM General has more than six decades of
experience meeting the changing needs of the defense and automotive industries, supported by its employees in Indiana, Michigan, and Ohio, and a strong
supplier base that stretches across 43 states.
Proprietary and confidential
10South Bend – Mishawaka MSA
Map & Legend
Asset Located in the Mishawaka Submarket
Proprietary and confidential
11Market Overview
South Bend – Mishawaka MSA Overview
Demographics
South Bend – Mishawaka MSA Overview 1-MILE 3-MILE 5-MILE
RADIUS RADIUS RADIUS
The South Bend – Mishawaka metropolitan area features a population of approximately POPULATION
300,000 and an additional daytime employment population of 137,200. Employment in the 2021 Projection 1,741 37,152 116,941
metro area has been largely flat thus far in 2015, following growth of more than 2.5 percent 2016 Estimate 1,721 36,730 115,515
(approximately 3,500 new jobs) in 2014. Major industries include education and health services 2016 Number of Households 650 15,219 47,120
(accounting more than one-quarter of total employment in the region), trade, transportation, 2016 - 2021 Projected Growth 0.2% 0.2% 0.3%
utilities, and manufacturing.
Age 0 - 14 15.6% 18.7% 19.4%
The University of Notre Dame leads the list of top employers, with more than 4,400 faculty and Age 15 - 24 11.9% 13.1% 13.8%
staff. Other significant employers include the Memorial Health System (3,000 employees) and Age 25 - 44 22.4% 27.0% 26.0%
AM General (facility adjacent to the Asset with 2,400 employees). Age 45 - 64 32.1% 26.5% 25.9%
Age 65+ 17.7% 15.2% 14.9%
The South Bend Department of Community Investment has shown commitment to investing in
a “stronger South Bend.” This committee aims to improve South Bend’s neighborhoods and ESTIMATED HH INCOME
improve overall quality of life through construction and overall real estate development. In one Less than $35,000 24.2% 35.4% 36.0%
year, total investment in the local economy more than quadrupled while unemployment $35,000 - $49,999 18.6% 16.4% 16.2%
dropped by 25 percent. $50,000 - $74,999 16.0% 19.1% 18.7%
$75,000 - $99,999 14.2% 13.5% 11.8%
Development Activity More than $100,000 26.9% 15.6% 17.2%
Average Estimated HH Income $80,975 $61,742 $63,991
The former Studebaker auto-manufacturing plant has recently undergone a Median HH Income $58,517 $47,852 $47,299
redevelopment into a semiconductor research corporation national research
center. Known as Ignition Park, the area tech hub will drive population growth
and increase economic activity in the area. Market Snapshot as of 1Q 2017 (Total Industrial)
South Bend /
This scale of revitalization is healthily supported by a vacancy rate of 4.1 Mishawaka
Mishawaka Subject
percent across the South Bend – Mishawaka MSA’s total industrial market, (Market)
(Submarket) Property
with multiple submarkets touting vacancy rates less than 2 percent.
Total inventory (SF) 33,459,839 7,061,956 289,527
In total, South Bend’s total industrial market experienced over 450,000 square Total vacancy 4.1% 1.1% 0.0%
feet of space under construction and delivered in 1Q2017, continuing to be YTD Net Absorption (SF) 326,713 21,550 -
supported by low vacancy rates and positive net absorption figures. Asking (current) rental rate $3.97 $3.32 ($2.20)
Proprietary and confidential
13Industry & Tenant Overviews
Book, Magazine, & Newspaper Wholesale Industry
Overview
Industry Outlook Key Success Factors
Over the five years to 2021, the Book, Magazine and Newspaper Wholesaling industry will experience continued
Guaranteed supply of key inputs
disruption, as result of an ongoing consumer shift to digital media. However, print media has significant barriers to
entry as upstream and downstream clients have consolidated to improve efficiency. Established companies Having an extensive
command significant bargaining power and pressure wholesale pricing.
distribution/collection network
Print media has experienced sustainable growth in developing nations across the globe, as print circulation has
Having contacts within key markets
increased 10-plus percent over the last decade in regions such as Africa, Asia, and South America.
Provision of superior after-sales service
Paired with a global recognition of the importance of education, the need for printed media within educational
environments will continue to progress. Further, established brands with global networks are well positioned for Ability to control stock on hand
sustainable success.
The Book, Magazine and Newspaper Wholesaling industry is in the decline phase of its life cycle. Industry value
added (IVA), which measures the industry's contribution to the economy, is expected to decrease at an annualized
rate of 5.3% over the 10 years to 2021. By contrast, US GDP is forecast to grow an annualized 2.1% during the
same period. Consequently, the industry will account for a decreasing share of the US economy.
Capital Intensity
Competition & Barriers to Entry
In 2016, the average industry wholesaler
The major barriers to entry in the industry include the costs involved in obtaining a critical mass of products and
spends an estimated $0.09 on capital
customers. Established players usually compete on the exclusivity and diversity of their product portfolio. The
investment for every dollar spent on
industry has consolidated, and securing deals with upstream publishers and suppliers may be difficult for new
wages.
entrants.
Perhaps the greatest barrier to new entrants is the industry's declining relevance. Upstream and downstream Equipment requirements are low and the
industries alike have struggled to compete amid the ongoing shift to digital media. As a result, these upstream and main areas of capital expenditure in this
downstream industries have consolidated and now have significant bargaining power and distribution networks. industry include delivery vehicles,
Successful industry players must stock titles that are in demand, and thus global brands with established ties to warehouses, logistics and computerized
first-to-market benefits are in better position to perform. The process of creating these networks is difficult to inventory systems.
replicate.
Proprietary and confidential
15Tenant Overview
B e t t e r Wo r l d B o o k s O v e r v i e w
Better World Books is an online for-profit bookseller of used and new books founded in 2002, which donates books or a percentage of its profit to literacy
programs around the world. Better World Books sources their product inventory in an incredibly cost-effective manner, conducting low-cost book
buybacks and regular book drives at over 1,800 colleges and universities and receiving donations from over 3,000 libraries in aid of their charitable
initiatives.
The Tenant has previously received venture funding ($2.5M / Series A) from Good Capital LLC., a venture capital firm specializing in investment that
creates innovative, market-based solutions to inequality, poverty, and other social affairs. The Tenant received an additional $2.0M from 18 private
individuals.
The Company’s founders attended the nearby University of Notre Dame and have since partnered with the Gigot Center for Entrepreneurial Studies at the
university’s Mendoza College of Business, signaling organizational support from an esteemed academic institution.
Better World Books is equally committed to philanthropic performance as it is economically-focused, as evidenced by over $24 million in funds raised for
worldwide literacy programs and over 21 million books donated to humanitarian organizations across the world since the Company’s founding in 2002.
Company Overview
Company Qumpus, Inc. d.b.a. Better World Books
Year Founded 2002
Type Private
Industry Online Bookseller
Credit Rating Not Rated
Headquarters Mishawaka, IN
2016 Revenue $72.2 million
Employees 483
Website www.betterworldbooks.com
Proprietary and confidential
16Tenant Overview
B e t t e r Wo r l d B o o k s O v e r v i e w
Leading market position in the used-book market Technology-based e-retailer with scalable and sustainable service
~40 million books processed and ~10 million books sold annually infrastructure
Top 3 player in the U.S., and a leading player in the U.K. Providing high value-add end-to-end solution to our supplier partners
Unique business model built upon receiving unknown product from our suppliers and
Top-tier, highly diversified and proprietary supply-side sorting, processing, warehousing, and monetizing it on a profitable basis
relationships Relentless focus on operating efficiencies
5,000+ supplier relationships among libraries, educational institutions,
and businesses in the U.S. and U.K.
Top 10 represent ~20% of inbound volume
Better World Books’ Processing System
Operates from 3 main facilities
Acquired books are accepted and sorted at the BWB facility in Mishawaka, IN based
HQ in Mishawaka, IN (launched in 2002); West Coast warehouse in
on proprietary algorithms that reference historical sales performance, real time market
Reno, NV (late 2015) and U.K. warehouse in Dunfermline, Scotland
sales data and existing inventory; only profitable titles are selected.
(2008)
Feature Description
Better World Books will leverage a fully automated system
that identifies books passing through on a conveyer belt.
Automation will cross-reference a target book’s ISBN with
Product
available inventory, real time market sales data and
Identification &
historical sales performance of the title and genre to
Data Capture
determine acceptance / recycling / donation.
If accepted, automation will automatically label books and
pass them through to Inventory Sortation.
Manual Process Books without ISBN’s (printed pre-1970) are manually
Line accepted and processed.
Wholesale & Books that are not fit for inventory (based on excess supply
Donation or historical sales prices) are sorted for donation or
Sortation recycling.
Inventory Employees leverage proprietary software to predetermine
Sortation book quality for sort efficiency.
Proprietary and confidential
17Tenant Overview
B e t t e r Wo r l d B o o k s O v e r v i e w – H i g h l y D i f f e r e n t i a t e d E n d - t o - E n d B u s i n e s s M o d e l
Supply of Books Better World Books Demand for Books
Academic Libraries Scalable Operating Infrastructure 3rd Party Marketplaces
1,400+ 74.1% of sales
Public Libraries
2,400+ Sorting and Processing
Process 40mm+ Books/Year International Subsidiary
Wholesale & Campus Capacity ~100mm Books/Year 16.2% of sales
2,000+
Inventory
Thrift Currently 7.4mm books retained
25+ for sale based on data analytics Betterworldbooks.com
Dynamic storage & picking 7.8% of sales
Drop Boxes
800+ Recycling (Sustainability)
20mm+ books/year Other
International Retail, Recycling, etc.
1,200+ Sales 1.9% of sales
9.5mm+ books/year through
branded website & 53 marketplaces
Proprietary and confidential
18Tenant Overview
B e t t e r Wo r l d B o o k s O v e r v i e w – K e y S t a t i s t i c s & C o m p a n y R e c o g n i t i o n s
Key Statistics 2012 Top 500 eRetailers (# 250) 2009 - 2013 Fastest Growing Company
2011 Top 500 eRetailers (# 261) Inc. 500/5000
» Founded: 2002 (Founding B-Corp) 2010 Top 500 eRetailers (# 293)
» Headquarters: Mishawaka, IN Internet Retailer Top 500 eRetailers
» Employees: 483
Revenue Most Promising Social Entrepreneur
($ in millions, fiscal years ending June 30) Business Week
Fiscal Year
FY15A 70.6
FY16 72.2
FY17P 80.5 Business School Case Studies
FY18P 90.6
FY19P 104.5
The World's Most Valuable Startups
Business Insider's Digital 100
» Books Processed: 40mm+ per year
» Books Sold: 9.5+mm per year
» Distribution: 53 online marketplaces
» # of Suppliers: 5,000+
Top 25 Responsibility Pioneers
Time Magazine
Proprietary and confidential
19Additional Property Photography
Additional Property Photography
Proprietary and confidential
21Additional Property Photography
Proprietary and confidential
22Additional Property Photography
Proprietary and confidential
23JLL Contacts Investment Sales Contacts: Peter Bauman Tivon Moffitt John Paul Mulhern +1 602 282 6289 +1 602 282 6348 +1 602 282 6346 peter.bauman@am.jll.com tivon.moffitt@am.jll.com Johnpaul.mulhern@am.jll.com Broker of Record Rebecca Wells +1 317 810 7009 rebecca.wells@am.jll.com License Number: AB21400892 www.jllproperty.us/net-lease © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
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